Intu may offer bargains that Hammerson needs
JSE-listed Hammerson Plc, owner of the UK’s iconic 44-year-old Brent Cross London shopping centre and Birmingham’s Bullring mall, has an opportunity to buy highly rated UK retail assets on the cheap.
Intu Properties, which owns 17 malls in the UK and one in Spain, is facing its darkest hour as it tries to raise cash to fund day-to-day operations. It said in January it was planning to raise capital at the end of February but didn’t say how much it needed to raise. Since then, groups that could invest in Intu have declined to do so, including Link, a Hong Kong group.
But Hammerson, which also owns super-regional malls in France and the Republic of Ireland, as well as small shopping outlets across Europe, tried to buy out Intu in December 2017 for £3.4bn (about R66.5bn). Then in April 2018, Hammerson walked away, blaming deterioration in the British retail property market and concern about a lengthy merger process.
The group could try again now that Intu trades at a discount of 93% to net asset value and has a market capitalisation of R3.6bn. Or it could consider buying an asset or two from Intu, including its Intu Trafford Centre, Manchester’s largest.
Hammerson’s management is keeping mum on acquisitions.
UK retail may be out of favour now but it will rebound as Brexit kicks into gear and when mall tenants have restructured their offerings to better compete with online retailers.
DISNEY
The magic kingdom has a new ruler. Bob Iger’s unexpected decision to quit early as Disney CEO clears the way for theme parks head Bob Chapek to take over. The transition from Bob to Bob will probably be smooth, but Iger’s exit means Disney’s era of dauntless deal-making may be coming to a close.
Chapek’s nearly 30 years at the group leaves him well placed to preside over its mix of businesses. Choosing the parks head over, say, head of direct-to-consumer division Kevin Mayer runs counter to the fuss over the importance of Disney’s new $7/month streaming service. Streaming is a long-term bet to neutralise cable’s decline, but tourism pulls profits forward.
Plastic castles, roller-coasters and parades attract about 160-million visitors a year says the Themed Entertainment Association, making Disney the largest theme park operator. Parks sprawl across thousands of acres in the US, France, Hong Kong, Japan and China. More locations have been hinted at.
Even after attendance dipped at some parks last year, rising prices kept operating profits up. Single-day peak tickets at Disneyland in California rose $10 in the past year to more than $200. Parks and Resorts is the biggest division by sales and profit growth. In the past financial year, operating income rose 11% to $6.8bn. There was an 11% decline at Studio Entertainment.
Theme parks are vulnerable to downturns. Closing parks in Shanghai and Hong Kong amid the coronavirus outbreak will weigh on growth. But Disney fans are a devoted bunch.
Iger remains executive chair until 2021. Iger put Disney’s cash and rising stock value to good use for years, making successful acquisitions that peaked with the $71bn purchase of Fox’s entertainment assets in 2019. When he took over in late 2005, Disney’s equity value was less than $50bn. Now it tops $230bn.
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